IMPORTANT UPDATE – February, 2025 On February 18, 2025, following a decision by the U.S. District Court for the Eastern District of Texas in Smith v. U.S. Department of Treasury, et al., 6:24-cv-00336 (E.D. Tex.), beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (“CTA”) are once again back in effect with a new deadline of March 21, 2025.
BOI Reporting Delayed – For Now
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that:
- enjoins the CTA (“Corporate Transparency Act”), including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically,
- stays all deadlines to comply with the CTA’s reporting requirements.
As a result, under the injunction, the CTA and the BOI reporting rule cannot be enforced, and reporting companies need not comply with the CTA’s Jan. 1, 2025, BOI reporting deadline pending a further order of the court.
The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024. The preliminary injunction, however, likely will remain in effect through the appeal process or until the court issues another order.
Should You Still File Your Business(es)’ BOI Report?
While this litigation is ongoing, FinCEN confirmed it will comply with the order for as long as it remains in effect. However, there is a chance that the injunction could be overturned and/or a new court order issued at any time. Since the BOI reporting deadline is January 1, 2025, we recommend that affected Warady & Davis clients proceed with BOI Reporting to avoid any last- minute scramble to comply.
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. In addition, the CTA was a bi-partisan effort and is unlikely to go away completely.
Background
Under the CTA, P.L. 116-283, which Congress passed in 2021 as an anti-money-laundering initiative, reporting companies must disclose the identity and information about beneficial owners of the entities. For new entities incorporated after Jan. 1, 2024, reporting companies must also disclose the identity of “applicants” — defined as any individual who files an application to form a corporation, limited liability company, or other similar entity.
Willful violations are punishable by a fine of $591 a day, up to $10,000, and two years in prison with similarly serious penalties for unauthorized disclosure.
More Information
For more information regarding the BOI reporting requirements including FAQs and a helpful short instructional video visit https://www.fincen.gov/boi. The AICPA has also created a BOI reporting resource center. You may also contact your Warady & Davis LLP business advisor with any additional questions or concerns – (847) 267-9600 or [email protected].
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